Nein, Nein, Nein

Herman Cain's tax proposal is a trap

Pizza baron Herman Cain has somehow wedged his way into the top tier of the Republican primary field in the past weeks. With a calculated mix of straight talk and business-minded efficiency, the Koch brother darling and former Godfather’s Pizza chief executive has elbowed his way past the Perrys and Bachmanns into the new hype-candidate-of-the-month slot. The centerpiece of his platform is his 999 Plan to simplify taxation, but what he presents as a no-nonsense policy is in fact a thinly-veiled attempt to create a regressive tax code.

His proposal is very succinct: Replace the heart of the current tax code with a flat nine percent tax on business transactions, labor (non-investment) income, and sales tax. The problem with the 999 Plan is that it is reductive and facile and pretends to be egalitarian when in fact it is elitist. Much like many other “solutions” proposed by prominent conservatives in recent months, it takes a very complicated problem and gives it a slogan-length solution.

Herman Cain is a businessman, and he understands the value of a good, simple slogan. In fact, the verbal breeziness of his taxation policy bears a striking resemblance to a promotion by one of his pizza-industry competitots—remember Domino’s “5-5-5 Deal” a couple years back?

But Cain’s proposal is a wolf in sheep’s clothing. He states that for many people, taxes will go down. He also says that it will eliminate the much-derided concept of double taxation. In reality, only for the upper tax brackets and corporations will the burden of taxation decrease, while for the average family, the 999 Plan will raise taxes by sapping the same income in triplicate.

Those on the lower end of the income spectrum will go from paying perhaps zero percent to up to 27 percent. The reasoning goes like this: for the average American, the bulk of income comes from wages earned. Investment income, which is most important only for those wealthy Americans who have enough wealth to invest beyond for retirement, is exempted. Then, every purchase that this average earner makes will be struck again by the newly-implemented federal sales tax. The lower the income of a family, the higher the percentage of that income will be spent on consumption of goods. Someone making millions a year cannot possibly spend that much and therefore be hit by the sales tax, but a family making $40,000 a year will likely have every cent of that affected by the sales tax. Finally, the business transactions tax will be passed onto the laborer in the form of lower wages because it amounts to little more than a value-added tax. So there we have it: the 999 Plan is nothing more than a 27 percent flat payroll tax.

However, many of those who advocate a flat tax do so because they abhor the concept of progressive taxation. The members of Congress who refused to let the Bush tax cuts expire for the wealthiest citizens are largely the same ones who support a flat tax, and for the same reason. The reason we have a progressive tax system at all is based on the idea that a one percent increase in income tax is much less painful for someone who is making seven figures than for someone who is making five.

Cain’s tax is therefore not progressive in the slightest. It is regressive in that someone who makes little more than he or she needs to spend in order to survive will pay a higher rate of taxation than someone who lives off of a fraction of his or her income. While he claims that he is pursuing a broader tax base, he is merely shifting the heavy lifting of revenue generation to those who can afford it least.

Cain’s appeal to voters lies in his perceived lack of misleading and superfluous rhetoric. He presents himself as a straight shooter, and his campaign slogan of “Let’s Get Real” is diametrically opposed to “Change We Can Believe In”-esque idealism. His rise to stardom is itself the culmination of the anti-2008 counterrevolution that so many Republicans hope for: Cain is the anti-Obama. He speaks not in grand rhetoric that glosses over his complicated solutions, but rather in simple solutions that gloss over complicated problems.

The godfather of Godfather’s is making offers the American people must refuse.